Cisco’s investment in CoreWeave could mark a major step in the tech giant’s aggressive AI push, analysts have told ITPro.
Reports emerged last week that Cisco plans to invest in CoreWeave in a deal that will see the GPU firm valued at $23 billion. While neither firm has confirmed the agreement as of yet, CoreWeave does appear to be setting its sights on bumping its financial valuation as it considers an IPO early next year.
Bloomberg reported earlier in the year that CoreWeave CEO Michael Intrator had discussed a transaction that would enable existing shareholders to sell between $400 million and $500 million of their holdings.
CoreWeave, which produces and develops cloud-based solutions for GPU infrastructure, could be a smart investment for Cisco for a number of reasons.
With enterprises globally looking to adopt and deploy generative AI tools, the demand for the services of a company like CoreWeave’s has potential to soar. By pitching itself with CoreWeave, Cisco could give itself a stronger footing in the AI market.
Cisco must expand its footprint and ensure that it can meet the needs of customers looking for AI support, CCS Insight analyst Bola Rotibi told ITPro.
“I think this is why they are investing in companies like CoreWeave,” Rotibi added.
It’s also a shrewd move from a financial perspective, Rotibi added. Cisco, and companies like it, are faced with the options of starting from scratch with AI or buying something out in its entirety.
Rotibi thinks Cisco is taking a savvy, third option though, by making an investment rather than attempting to buy the entire company.
To an extent, it “piggybacks” on CoreWeave’s existing research and development and strength in the market without Cisco having to make the full commitment of purchasing the company.
“It’s shoring up its capacity through the strength of another company that already invested heavily, has already got backers,” Rotibi said. “I think it's a smart move, personally.”
As Rotibi noted, Cisco slashed it’s workforce by 7% globally back in August, amounting to over 6,000 members of staff internationally. This may have affected Cisco’s financial decision making.
“It's let a lot more people go than maybe everybody had thought, so therefore it's had to put money aside for that, which I can imagine means it has to be quite sensible and careful with where it puts its money,” Rotibi said.
“This seems like a sensible option,” Rotibi added.
At the time of the layoffs, Cisco’s CFO said they were not about cost savings but about relocating resources into growth areas such as AI.
Cisco’s razor sharp AI focus takes shape
Cisco has sharpened its AI focus over the last 18 months, much like counterparts elsewhere across the global tech industry. A key component in its recent push here, however, lies with Splunk.
The networking giant confirmed the acquisition of Splunk in 2023 as part of a $28 billion deal. At the time, Splunk CEO Gary Steele specifically highlighted the AI focus of this deal, underlining Cisco’s ambitions in the space.
So far, the acquisition appears to be paying dividends for Cisco. At the firm’s annual Cisco Live conference in Las Vegas this year, the pair unveiled a raft of new AI-focused services and tools for customers.
Splunk’s annual conference saw similar messaging on the AI front, highlighting the growing synergy between the two companies.
